Treasury reports Budget deficit NZ$856 mln better than forecast in 9 mths to March, but only due to early returns from corporates and SOEs; English says still on track for 2014/15 deficit

Treasury has reported a Budget deficit of NZ$358 million for the nine months to March, which was NZ$856 million better than the Treasury’s forecast in December.

However, Treasury said more than NZ$500 million of the improvement related to earlier than expected corporate tax receipts and SOE dividend payments.

Finance Minister Bill English said Treasury still expected to post a small deficit for the current 2014/15 year despite the better than expected result for the first nine months of the year.

“Although tax was ahead of expectations, these figures underscore the difficulty in forecasting the difference between two large numbers,” English said.

“Treasury consider that around NZ$400 million of the variance was the result of tax being paid earlier than expected – rather than an ongoing increase in the tax take,” he said.

Treasury also reported in its accounts that SOE dividends were NZ$236 million higher than forecast, mainly because of timing factors.

It said about NZ$300 million of the higher corporate tax receipts were due to early payments, which were expected to be reversed in the June quarter.

Overall, Government revenues were NZ$844 million higher than forecast in December, including ‘other taxpayer’ payments being NZ$357 million higher than forecast, mainly due to higher provision tax payments by non-farmers.

GST was NZ$201 million below forecasts, mainly due to weaker nominal growth in consumption, although NZ$60 million was due to larger than forecast earthquake-related refunds.

Core Government expenses were NZ$127 million lower than forecast.

English said Core Crown expenditure for 2014/15 was now expected to be NZ$4.1 billion lower than forecast in 2011, when the Government’s target for a surplus in 2014/15 was first set.“We’re getting on top of spending, but lower inflation, while good for households and businesses, means Treasury’s Budget forecasts will show a small deficit for 2014/15,” he said.

The Government’s residual cash deficit for the nine months to March was NZ$1.3 billion below forecasts, while net debt was NZ$1.7 billion lower than forecast at NZ$63 billion.